Mistakes made when using credit cards can cost a lot of money.

Mistakes made when using credit cards can cost a lot of money. If you take the time to research and understand the use of credit, you can make informed choices that may actually save cash. Watch out for the ten following errors made when utilizing credit cards.

Mistake #1-- Failing to Shop for the Best Credit Card Rate

The terms, conditions, and interest rates of credit cards vary widely. If you intend to pay interest on your credit card purchases (i.e., if you do not anticipate paying the entire balance off each month), it may be beneficial to do some informed shopping beforehand.

The following sources allow comparisons of credit cards:

- MSN Money’s credit card analyzer lets you compare cards at

http://moneycentral.msn.com/banking/services/CreditCard.asp.

- CreditCards.com lets you compare cards at http://www.creditcards.com.

- The Federal Reserve Board surveys and compares credit cards every six months at http://www.federalreserve.gov/Pubs/shop/survey.htm.

Mistake #2-- Paying Only the Minimum Payment

Paying the minimum payment on your credit card statement seems easy in the short term. In the long term, however, you will pay highly for instant gratification. Online calculators can help decide how much that minimum payment really costs over time for the original purchase you made on your card.

- The Web site at http://www.webwinder.com/wwhtmbin/java_cci.html calculates the interest over time when you make only the minimum payments on a purchase.

Mistake #3-- Maxing Out Your Card

If you “max out” your credit card (charge to its maximum limit) and have a high credit limit on the card, chances are good that you will pay an enormous amount of interest over a long period. Chances are also good that you are extended well beyond your financial means.

Avoid maxing out your credit limit and avoid going over the limit, which could cost you additional fees.

Mistake #4-- Using the Cash Advance Feature of Credit Cards

While cash advances can be tempting, they are usually a very expensive way to get a loan. Read the fine print and understand cash advances completely before deciding to activate this feature.

Mistake #5-- Failing to Look at the Fees as Well as the Benefits of the Card

Does the annual fee that you pay cancel out the cash back benefit of your card? Are you paying more in credit card interest than what is made on the cash back benefit of the card?

If so, you are not coming out ahead with your card. Cash back rebates may look attractive, but are worthless if other fees and interest paid on the card exceed them. When you choose your card, consider all aspects: interest rates, benefits, and fees.

Mistake #6-- Making Late Payments

Late payments can hurt your credit rating and cost large late fees and interest charges. Plan to mail your payments at least ten days in advance. If payment timing will be an issue, check to see whether your card allows authorized payments by phone.

Mistake #7-- Carrying a Card Balance

Many people carry a card balance over time, and pay for the privilege with high interest rates. If you have the discipline and the means to pay off your credit card balance in full each month, it may help to give yourself the following parameters:

- What is the limit I can charge each month and easily pay off (on time, with no interest) without negatively affecting the rest of my budget?

- Do I have the discipline to track what is put on credit cards each month and stop at the defined limit?

If you use a cash back card and regularly pay the balance in full, you can actually make money on the card.

Mistake #8-- Holding Too Many Cards

Very few people need all the credit cards that are offered to them, and a person without financial discipline can get into deep trouble with one card, let alone several. If you hold many cards and do not use them, it might impact your ability to get credit approval if a lender is uneasy about the amount of credit potentially available to you.

Mistake #9-- Failing to Read the Fine Print in your Credit Card Agreement

New credit card customers are often tempted by low- or no-interest introductory rates. If they have failed to understand the terms of their credit card, these customers may be surprised when the rate suddenly jumps to a high level, after the introductory period.

- The Federal Reserve Board explains some of the ins and outs of credit cards at http://www.federalreserve.gov/Pubs/shop.

Read your credit card agreement carefully and be sure to understand all the terms, requirements, and fees that you are responsible for by accepting the card.

Mistake #10-- Failing to Carefully Read your Statement

If overextended, you may want to avoid looking at your new statement. However, check the bill as soon as it arrives because credit card companies sometimes make errors. In addition, identity theft is on the rise and fraudulent charges may show up on your statement. You may have a limited time to dispute such charges – check the terms of your card agreement.